Should You Buy a New or Used Car? Answer: Neither!

When it comes time to purchase a vehicle for you and your family, there are many things to consider. You have to think about gas mileage, practicality, maintenance costs, styling, and financing, just to name a few. You also must choose if you are going to buy or lease the vehicle, which with just a little bit of math– ends up being an easy question (you should buy!). You find yourself with a much tougher question when you ask the question should I buy a new or used car?

New cars lose a significant chunk of their value (as much as 20%) as soon as you drive off of the lot, which is rather staggering. However, even with that, there are certain factors that make purchasing a new car the more desirable option. This post will examine the main reasons why people opt for both new and used cars, and will present a third option that we here at See Debt Run have used for both of our family cars.

New Cars

What is it about that “New Car Smell” that makes it so appealing? What does it mean? It means that this car is fresh from the factory, and is basically a blank canvas. If this new car has a future as a well maintained workhouse that will run for over 200,000 miles, it is mostly up to you- the new owner. Yes, the main appeal of purchasing a new car, is that you have the full lifetime of the vehicle at your disposal. Sure, that shiny new toy will surely be dotted with the bumps and nicks of life over the next several years– but it is appealing to know that you will be the one who is doing the bumping and nicking. In time, that new car smell will be replaced with the scents of your life.

From a financial perspective, there is a price to all of that comfort. Because they depreciate so quickly, the price of new cars is considerably more than what you will pay for a used one. In recent years, however, manufacturers and dealers have really stepped up their incentive programs to help bridge the dollar gap between new and used. If you have decent credit and can swing a 36 month loan, zero percent interest loans are fairly commonplace. Many dealerships will also inflate the value of your trade in, in an effort to get you to help clear new inventory off of their lot. Virtually every automaker offers a warranty on their new vehicles (of varying lengths and qualities), which will give you both financial protection and peace of mind. Several have even started offering “maintenance care plans” that actually cover the costs of routine maintenance on new cars, which is a trend that we fully approve of!

Used Cars

When you start to go car shopping, you should already have a dollar figure in mind for what you can afford. The simple truth is, that your money is going to go a lot further if you purchase used instead of new. For the same investment, you should be able to upgrade to a nicer model. For example, you can get a Toyota Camry instead of a Toyota Corolla, or a Nissan Maxima instead of an Nissan Altima. The mark-up on options is also considerably lower on used cars. If you prefer to have leather seats, a premium sound system, a sun roof, or navigation system, these options can carry a hefty price tag on new vehicles. When you purchase used, the original owner paid the bulk of the costs, and you get to reap the benefits.

While saving money is the obvious benefit to purchasing a used vehicle, a portion of the car’s life has already been used up. Depending on how many miles the car has driven (easy to see), and how well it was maintained (much harder to see), the car may not have as much life left in it as you would hope. It wouldn’t be smart to take out a five year loan, for example, on a car with more than 50,000 miles. If your car breaks down and you still find yourself having to make payments, you could find yourself in a very hairy situation.

The See Debt Run Option: Purchase a Slightly Used Car

We define a slightly used car as having less than 25,000 miles on it, which puts it in its relative auto infancy. Purchasing a car in this state has multiple benefits:

You get all the benefits of a used car, in that the lot premium has already been paid– and thus you should be able to afford a nicer model with more options.

Prior to 25,000 miles, the only scheduled maintenance items are oil changes (and tire rotations). Most people at least do this for their vehicles, so the amount of damage that can be done by previous owner’s neglect is limited.

Since the car is fairly new, chances are high that a good portion of the manufacturer’s warranty is still in effect. Many dealers will also offer a “certified” program that will extend this warranty even further.

As mentioned previously, we have two vehicles that we purchased slightly used in the past few years. Our family car is an SUV, with leather seats and a flip-up third row. We purchased it from the used lot of a luxury dealership with 25,000 miles on it. We saved over $12,000 off of the price being asked for a similarly equipped new version of the same car. Our second car is a larger four-door sedan, which I call my “work-sled”. It was about 5 years old when we purchased it, but only had 18,000 miles on it! The previous owners were elderly, and didn’t drive very much. As such, we saved nearly $20,000 off of the cost of purchasing a newer version of same car.

If you find yourself car shopping in the months to come, you should consider the slightly used option!

52 Comments

I agree! A slightly used car is the way to go. In 2010, I bought a 2007 Toyota Camry with 3,400 miles (Yes, 3,400) on it. It was an elderly lady who couldn’t drive anymore. I paid $6,000 below what anyone else was offering the same car for with more miles. That’s how we roll!

I purchased a “slightly used car” in January – it had 42,000 KM on it (about 27K miles) and it was substantially cheaper than if I bought it new. It’s perfect for me and I don’t have to worry about it breaking down on the side of the road for years to come.

Yes slightly used is definitely the way to go. That’s the route I went with my first car and I got a good deal on a car that had upgrades like leather seats and a sunroof. If I had been buying new I would’ve had to pass on those kinds of things. Unfortunately I made the mistake of buying new with my last car. Boy did I lose a lot of value in that car already.

Both of our cars have sunroofs and leather seats, and at this point– I can’t imagine going without the leather. I have kids, and kids spill things.. With leather, you can just wipe the spills right up! I have had cloth seats in the past, and when the kids spill things, the smells tend to linger.

As a carsharing advocate, I have to make my pitch to your readers: If you live in a city where carsharing is offered, might a combination of biking, walking, taxis, rental car, and carsharing meet your needs and save a ton of cash? Owning a car is expensive! Maybe you can give up owning a car altogether, or perhaps own one instead of two.

I would love to do this, Kurt– But the place where we live is just not friendly to going car less. Practically nobody here lives anywhere close to where the jobs are, and our public transportation is weak, to say the least.

Some car buying experts have said that purchasing a new car is the best option for the long-term financial benefit. However, purchasing a slightly used car would be the best option if you’re looking for a lower priced vehicle with low mileage that is well=maintained. This is especially the best option if you don’t drive very often.

If you tend to drive cars to the very, very bitter end. Then I could perhaps see getting a brand new car (if you got some great incentives). Otherwise, I just don’t think the benefits outweigh the cost.

Unfortunately, slightly used is still out of our price range as we try to only pay cash. The goal will certainly be to afford those though but while our ’97 Accord is still churning we’ll continue to let it coast down the road. We’re almost at 200,000 miles and I think I’ll celebrate when it gets there!

I like to aim for 4-year old cars and if they have 30k-60k miles on it then I’m not too opposed.

I come from the camp of NEVER buying a car that is less than 5 years old. My reasoning is that you car will depreciate more than 70% in the first 5-7 years. Ugh! I think that people need to learn a little bit about car maintenance and save themselves thousands by buying something a little older with a few more miles. Though “slightly used” will get you a discount, your car is still dropping in value like a rock for another few years.

Maybe I’m a little biased because I have two cars that have over 250,000 miles on them, get great gas mileage (30+ mpg) and don’t cost must as far as maintenance goes. I think it really depends on if you are scared of cars or not. I think people that want to save money still overpay for their cars because they are scared of an older car leaving them stranded. Knowledge is definitely power, so a little internet reading and forum surfing can get most people comfortable enough that they don’t buy newer out of fear.

I completely understand that many people don’t want to even think about car issues, so they’ll fork over a few thousand more for that assurance, but I think it’s throwing money out the window. Especially if you in a place that you are trying to get out of debt and build wealth, I would re-consider that newer car and look at a “slighty more used” Honda or Toyota.

I haven’t done it yet, but I really want to thank the previous owner the next time I buy a car for subsidizing my purchase by eating all of that depreciation

Also, NEVER borrow to purchase a vehicle (unless it’s over 5 years old, comparable to private sales pricing and a 0% loan that you can pay off within the alotted time).

Interesting take, Jacob.. But I don’t think that ALL cars age so gracefully. At one time, I bought a cheap Hyundai and it suffered major engine problems at only 60,000 miles, completely out of the blue (I won’t repeat that mistake again).

If you buy a car that has already been heavily used (over 50,000 miles) it might have gone through several owners already. Chances are decent that at some point, the car was owned by somebody who didn’t care for it properly.

I completely agree that not all cars age the same, so don’t buy those cars! Hyundai’s definitely don’t age well (at least pre-2004 or so). I guess we just have different definitions of what a used car is. “Heavily used” to me = over 150,000 miles. I think the most important thing is to do research before buying so you know common problems with those cars. Buying used is scary because you don’t know the history of the car, but if you know common issues, you can know what questions to ask and what to expect and look out for.

Sorry, not trying to be confrontational, I just see too many people buying a car at a much higher price point, thinking they are buying “reliability” only to find that my $1600 car is just as reliable if properly maintained and cared for. I think a bit more research can ease the fears of buying an older car and help save thousands

But fair warning, do NOT buy a car with more than 100,000 miles (or any car, for that matter) if you haven’t done any research

I agree with Jacob. I have a Truck with 200,000 miles and it runs great, starts every day no issues. Plus it is VERY easy to work on. Things I can’t do I have a mobile mechanic come to the house to repair and he is probably one fifth the price of dealer repair most people get sucked into. Does depend on the oil changes and regular maintenance. My wife’s car also has close to 200,000, 185,000 to be exact, but it too drives great and runs daily, No debt and very minimal repairs allows us to invest Ten of Thousands into our retirement plans every year just from those two vehicles, opposed to having car payments and higher rates of insurance for financed vehicles.
DC

I am in 100% agreement with this posting! I have always purchased slightly used. However I am the most proud of my recent purchase in November. I was forced to purchase a car as my truck was totaled in an accident. However, it wasnt so bad. My truck was paid off and I had an extra $3,000 to play with. I did my search online. I knew I wanted a comfy car with room in the back for my kids gear, the dogs or any camping trips. I knew I wanted a V6 or 4 cylinder as my husband has a V8 and well….gas is only going up! So I narrowed it down to the Vibe, Matrix or Calibur. I wheeled and dealed with dealerships online. I HATE walking in and spending hours at the dealership. I was also pre-approved through my bank. I ended up purchasing an 08 Vibe with 36,000 miles on it. I got the dealership to lower the price by $2,000 online. I showed up, test drove the vehicle and did research on the prior owner. Who was elderly and retired. When I got there, I talked them down another $500 and did not have to pay any of their fees. I ended got an amazing deal and with my money down….I only had to get a loan on 70% of the value, leaving me 30% cushion. I did not roll in taxes and paid cash for them as well. The payment is $110 less a month than my old truck and is way better on gas too!!

Sounds like you got an excellent deal, Jessica!! I really like how you negotiated online, to avoid the ridiculous games at the dealership. I am definitely going to use that strategy the next time we have to go car shopping.

Only certain dealerships would negotiate online….so…I only dealt with the ones that would negotiate with me. If they would say you need to come in to negotiate, I would reply, I am pre-approved,have down payment money and am ready to purchase the vehicle now if the deal is right. After I said that, most would negotiate. But some absolutely will not negotiate over the internet.

These are great points. I’ve never been in favor of buying a brand new car even though the new smell is so tempting. You lose money right after you sign your name to the loan. The points you bring up about 25,000 miles are interesting. Hopefully the previous owners took good care of it and maintained the car well.

My car was four years old and had 48,000km on it. It just misses the cut qualify as slightly used, but it certainly qualified as “a lot less used” than other, similarly priced models with vastly more kilometres on them. My advice: Look for lease returns, they’re often gently used, well maintained and clean.

I’d have to disagree with your “slightly used” term, but than again that’s your opinion only. Great post though. I recently purchased a 2009 BMW – 75,000km for well below what the new ones are going for. The financing rate was great too.

Absolutely this is the best way to go. However, don’t waste your time going to a dealer to try to get a slightly used car. The dealers price the slightly used cars almost as high as a new car. Oftentimes, with dealer incentives, financing deals, etc, the price of a new car is lower than a slightly used car. Private sales of a slightly used car is the best way to go.

How you and I think alike! This has been my strategy for the last two purchases I’ve made for all the same reasons you’ve pointed out. The just slightly used car is the perfect compromise between value and something that still works!

Jefferson, another option to help with those slightly used cars is what I did, namely buying at a major model change. In my case the Toyota Highlander was getting a make-over (read getting bigger) and I didn’t want that in the slightest. I was able to get a one year old car with ~28k on it for about 40% less than new. Dealers wanted to get rid of the old model. And by consumer reports, the highlander is nearly indestructable, andother plus.

I totally agree. I would hate to buy completely used but it would suck to buy completely new. For the price of a new “cheaper” car, you could get a nicer car for the same price. I liked Jason’s post (Work Save Live) on CarMax, and if I had to buy a slightly used car, I’d check with them.

I just bought a net to me car. A 2007 Honda Civic with 58K miles for 13300 including taxes, license, and fees. I bought it from a private owner. A man in our neighborhood actually. He had bought his son a new car, and was getting rid of it. It’d my first car. It was tempting to put down 13K in cash as a down payment and buys new car, but I decided against it. Plus, my car has leather seats, a sun roof, premium sound system, and navigation system!

Used cars are, for some, a good investment. The used car is good for
cheap transportation, and fun. Used cars also have many different uses besides
just driving around. Some people buy used cars so they can restore them, while
other people buy used cars for their children to drive. While still others get
used cars for spare parts. The point is that used cars are good for many
different people, for many different reasons.

Thanks for this information about used cars and new cars. I am planning to buy a car but due to financial problem i am going to buy a used car. I also searched many car gallery , in between of my searching i found a site where i got all types of used cars & new cars with features,images & prices.

I have not lot bucks to spent on car deal so as my need i will go for a well kept used car . That will be better for me . My first choice is Toyota brand and it’s used cars also have long life so i will be satisfied with used one.

I have found that buying a new car means paying a lot for the new smell. A carefully bought used car represents no monthly payments, reliable, and even more upscale car than one can afford new. If you want to use your money on something more useful or fun, this is definitely the way to go. I have been doing this for 15 years now with great results. If you can separate who yiu are from which car you drive, you can save thousands of dollars a year by buying used.

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The authors featured on this site are not financial experts, but are instead normal folks just figuring out how to make ends meet. The opinions and advice featured on See Debt Run have worked well for our families, but may not work for yours. If you choose to incorporate any ideas included on this site into your own financial planning, you do so at your own risk. We do NOT take any responsibility for the decisions you may make, even if they were based on something you read on this site.